OKLAHOMA CITY, Okla. (Feb. 1, 2024) – A bill filed in the Oklahoma Senate would set the stage for Oklahoma residents to make everyday purchases using gold and silver stored in the Texas State Bullion Depository. The passage of this legislation would facilitate the everyday use of gold and silver in financial transactions in Oklahoma and set the stage to undermine the Federal Reserve’s monopoly on money.
Sen. Dusty Deevers filed Senate Bill 2030 (SB2030). The legislation would require the Oklahoma state treasurer to submit a proposal to the state of Texas that would create a process for the Oklahoma treasurer to issue debit cards to citizens of Oklahoma giving them the ability to make purchases that are debited from the balance of gold and silver deposits with the Texas Bullion Depository.
“Deposits of gold and silver in the bullion depository and transactions made using the debit card issued by the State Treasurer shall be considered legal tender, pursuant to the authority vested upon this state in Section 10 of Article I of the United States Constitution. Deposits of gold and silver in the bullion depository shall not be considered a commodity. The transfer, buying, or selling of gold and silver shall not be considered an exchange of commodity, and shall be considered an exchange of currency.”
SB2030 would also authorize the state treasurer to create a bullion depository in Oklahoma at his/her discretion.
The Texas legislature established the Texas Bullion Depository in 2015. The Texas depository received its first deposits in the summer of 2018. The following year, the state exempted precious metals in these depositories from taxation.
Another bill filed by Sen. David Bullard (SB1351) would also create a state-run bullion depository in Oklahoma.
IMPACT
In a nutshell, through the Texas depository, Oklahomans would be able to deposit gold or silver and pay other people using a bullion-funded debit card that seamlessly converts gold and silver to fiat currency in the background. Private individuals and entities would be able to purchase goods and services using assets in the vault in the same way they use cash today. Doing so has the potential to open the market to sound money in day-to-day transactions.
By making gold and silver available for regular, daily transactions by the general public, a depository has the potential for a wide-reaching effect. Professor William Greene is an expert on constitutional tender and said in a paper for the Mises Institute that when people in multiple states actually start using gold and silver instead of Federal Reserve notes, it would effectively nullify the Federal Reserve and end the federal government’s monopoly on money.
“Over time, as residents of the state use both Federal Reserve notes and silver and gold coins, the fact that the coins hold their value more than Federal Reserve notes do will lead to a ‘reverse Gresham’s Law’ effect, where good money (gold and silver coins) will drive out bad money (Federal Reserve notes).
“As this happens, a cascade of events can begin to occur, including the flow of real wealth toward the state’s treasury, an influx of banking business from outside of the state – as people in other states carry out their desire to bank with sound money – and an eventual outcry against the use of Federal Reserve notes for any transactions.”
Gresham’s Law holds that “bad money drives out good.” For example, when the U.S. government replaced silver quarters and dimes with coins made primarily of less valuable copper, the cheap coins drove the silver out of circulation. People hoarded the more valuable silver coins and spent the less valuable copper money. So, how do you reverse Gresham?
The key is to make it easier to use gold and silver in everyday transactions. The reason bad money drives out good is that governments put up barriers to using sound money in day-to-day life. That makes it more costly to spend gold and silver and incentivizes hoarding. When you remove barriers, you level the playing field and allow gold and silver to compete head-to-head with Federal Reserve notes. On an even playing field, gold and silver beat fiat money every time.
In most states, debts and taxes must either get paid with Federal Reserve Notes (dollars), authorized as legal tender by Congress or with coins issued by the U.S. Treasury — very few of which have gold or silver in them.
The United States Constitution states in Article I, Section 10, “No State shall…make any Thing but gold and silver Coin a Tender in Payment of Debts.”
The creation of an Oklahoma Gold Depository would take another step toward that constitutional requirement, ignored for decades in every state. Such a tactic would undermine the monopoly of the Federal Reserve System by introducing competition into the monetary system.
WHAT’S NEXT
SB2030 will be officially introduced when the Oklahoma legislature convenes on Feb. 5. At that time, it will be referred to a committee where it must get a hearing and pass by a majority vote before moving forward in the legislative process.
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